Citation Nr: 1436380
Decision Date: 08/14/14 Archive Date: 08/20/14
DOCKET NO. 11 17-232 ) DATE
)
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On appeal from the
Department of Veterans Affairs Regional Office in Portland, Oregon
THE ISSUE
Entitlement to a waiver of recovery of an overpayment of VA benefits in the amount of $16,380.00, created during the period from May [redacted], 2010 to November 30, 2010 based on the Veteran's incarceration, including the questions of whether waive is precluded by fraud, misrepresentation, or bad faith.
REPRESENTATION
Appellant represented by: Oregon Department of Veterans' Affairs
ATTORNEY FOR THE BOARD
Christine C. Kung, Counsel
INTRODUCTION
The Veteran, who is the appellant in this case, served on active duty from August 1969 to June 1971.
This matter comes on appeal before the Board of Veterans' Appeals (Board) from November 2010 and March 2011 decisions of the Department of Veterans Affairs (VA) Regional Office (RO) in Portland, Oregon, and the Debt Management Center in Saint Paul, Minnesota. A November 2010 rating decision reduced the Veteran's service-connected compensation award to a 10 percent rate effective May [redacted], 2010, resulting in an overpayment of benefits. A December 2010 decision from the Debt Management Center informed the Veteran that an overpayment in the amount of $16,380.00 had been created. In January 2011, the Veteran filed a request for a waiver of the overpayment. A March 2011 decision from the Debt Management Center denied the waiver request. The Board finds that, by expressing disagreement with the denial of waiver, has expressed disagreement with both the decision as to validity of creation of the debt as well as the denial of a waiver of overpayment.
The Veteran was scheduled for an April 2014 Travel Board hearing, to be held at the RO, but withdrew the hearing request on the date of the hearing.
The record shows that, in October 2010 and April 2011, the RO denied a dependency and apportionment claim for the Veteran's mother because they did not receive a copy of the Veteran's birth certificate. In the April 2011 letter, the RO informed the Veteran that they would continue to process the claim if the requested evidence was received by September 2011. The Veteran submitted a copy of his birth certificate in April 2011; however, the dependency and apportionment claims were not readjudicated by the RO. In an April 2014 statement, the Veteran and representative indicated that they continued to seek an award for dependent benefits for the Veteran's mother from July 2010 to May 2013. The claim to establish the Veteran's now deceased mother as a dependent for VA compensation purposes has not been adjudicated by the Agency of Original Jurisdiction (AOJ) on the merits, and the Board does not have jurisdiction over the claim. Accordingly, the issue is referred to the AOJ for appropriate action. 38 C.F.R. § 19.9(b) (2013).
FINDINGS OF FACT
1. The creation of an overpayment, in the amount of $16,380.00 was not the result of fraud, misrepresentation, or bad faith on the part of the Veteran.
2. The Veteran was at fault in the creation of the overpayment, and VA is partially at fault in the creation of the overpayment.
3. Repayment of the overpayment debt would not result in hardship to the Veteran.
4. Recovery of the overpayment of VA service-connected compensation benefits in the amount of $4,000.00 would defeat the purpose of the VA Compensation program.
5. A waiver of the overpayment of VA service-connected compensation benefits in the amount of $4,000.00 would not result in unjust enrichment of the Veteran.
6. Recovery of the overpayment of VA service-connected compensation benefits in the amount of $4,000.00 would be against equity and good conscience
7. Recovery of the remainder of the overpayment, in the amount of $12,380, would not defeat the purpose of the VA compensation program.
8. A waiver of the remainder of the overpayment, in the amount of $12,380, would result in unjust enrichment by the Veteran.
9. Recovery of the remainder of the overpayment, in the amount of $12,380, would not be against equity and good conscience.
CONCLUSIONS OF LAW
1. An overpayment of VA compensation benefits in the amount of $16,380 was validly created. 38 U.S.C.A. §§ 1114(a), 5313 (West 2002); 38 C.F.R. § 3.665 (2013).
2. The creation of the overpayment in the amount of $16,380 did not involve fraud, misrepresentation, or bad faith on the part of the Veteran. 38 U.S.C.A. § 5302(c) (West 2002); 38 C.F.R. §§ 1.963(a), 1.965(b) (2013).
3. Resolving reasonable doubt in the Veteran's favor, the criteria for waiver of recovery of the overpayment of VA service-connected compensation benefits in the amount of $4,000.00 are met. 38 U.S.C.A. § 5302 (West 2002); 38 C.F.R.
§§ 1.963, 1.965 (2013).
4. The criteria for waiver of recovery of the remainder of the overpayment in the amount of $12,380 are not met. 38 U.S.C.A. § 5302 (West 2002); 38 C.F.R.
§§ 1.963, 1.965 (2013).
REASONS AND BASES FOR FINDINGS AND CONCLUSION
Due Process - Waiver of Recovery of an Overpayment
The Veterans Claims Assistance Act of 2000 (VCAA) is inapplicable to the claim for waiver of recovery of an overpayment. See Barger v. Principi, 16 Vet. App. 132 (2002). In Barger, the United States Court of Appeals for Veterans Claims (CAVC) held that the VCAA, with its expanded duties, is not applicable to cases involving the waiver of recovery of overpayment claims, noting that the statute at issue in such cases is found in Chapter 53, Title 38, United States Code, and that the provisions of the VCAA are relevant to a different Chapter (i.e., Chapter 51); therefore, the VCAA is not for application in this matter.
The Board finds that general due process concerns have been satisfied in connection with the appeal for a waiver. Prior to reducing benefits, VA is required to comply with pertinent VA regulations concerning due process. Specifically, claimants are entitled to notice of any decision made by VA affecting the payment of benefits. Such notice should clearly set forth the decision made, any applicable effective date, the reasons for the decision, the right to a hearing on any issue involved in the claim, the right to representation, and the right to initiate an appeal of the decision. See 38 C.F.R. § 3.103(b) (2013). If the reduction is based solely on factual and unambiguous information or statements as to income, net worth, or dependency or marital status that the beneficiary provided to VA in writing or orally, with knowledge or notice that such information would be used to calculate benefit amounts, in lieu of advanced notice and opportunity for a hearing, VA will send written notice to the beneficiary at the same time it takes adverse action. 38 C.F.R. §§ 3.103(b)(3)(i), 3.105(h) (2013).
In this case, the Veteran's benefits were reduced based on the receipt of notice to VA from a correctional institution, showing that the Veteran had been convicted and incarcerated on March [redacted], 2010 for a felony. The RO notified the Veteran of the proposed reduction in benefits in September 2010 and benefits were reduced in November 2010. In December 2010, the Veteran was informed that he had an overpayment in debt in the amount of $16,380.00. Accordingly, the Board finds that VA has met all due process requirements for reducing the Veteran's benefit, and the Board may now address the merits of the Veteran's appeal.
In January 2011, the Veteran submitted a timely request for a waiver of the overpayment. In March 2011, the Committee on Waivers and Compromises informed the Veteran that a waiver of the debt in the amount of $16,380.00 was denied, and the RO issued a statement of the case in May 2011. The Board finds that additional notice and development are not necessary to address the Veteran's appeal, and the Board may proceed with adjudication on the merits of the Veteran's request for waiver.
Waiver of Recovery of an Overpayment,
Including Questions of Creation of the Debt and Bad Faith
A claimant has the right to dispute the existence and amount of the debt.
38 U.S.C.A. § 501 (West 2002); 38 C.F.R. § 1.911(c) (2013). In determining whether a waiver of overpayment is appropriate, the inquiry is focused on three distinct questions.
First, VA must determine if the overpayment at issue was validly created. See Schaper v. Derwinski, 1 Vet. App. 430, 434-35 (1991) (noting that before adjudicating a waiver application, the lawfulness of the overpayment must first be decided); see also VAOPGCPREC 6-98 (interpreting that, where the validity of the debt is challenged, that issue must be developed before the issue of waiver of the debt can be considered). The term "overpayment" refers only to those benefit payments made to a designated living payee or beneficiary in excess of the amount due or to which such payee or beneficiary is entitled.
Second, if the debt is valid, VA must determine if fraud, misrepresentation, or bad faith played a role in its creation. If it did, waiver of the overpayment is automatically precluded, and further analysis is not warranted. See 38 U.S.C.A.
§ 5302(a); 38 C.F.R. §§ 1.963(a), 1.965(b); see also Ridings v. Brown,
6 Vet. App. 544 (1994) (holding that the Board must independently address the matter of bad faith before addressing whether waiver would be appropriate).
Finally, if VA determines that the debt is valid and that fraud, misrepresentation, and/or bad faith had no part in its creation, VA must then consider whether collection of the debt would be against equity and good conscience. See
38 U.S.C.A. § 5302(b); 38 C.F.R. §§ 1.962 , 1.963, 1.965.
An overpayment is created when VA determines that a beneficiary or payee has received monetary benefits to which he or she is not entitled. See 38 U.S.C.A.
§ 5302; 38 C.F.R. § 1.962. The law provides that if any person to whom VA compensation is being paid is imprisoned as the result of conviction of a felony or misdemeanor, such compensation payments will be discontinued effective on the 61st day of imprisonment following conviction. 38 C.F.R. § 3.665.
Any indebtedness of a veteran can be waived only when the following factors are determined to exist: 1) there is no indication of fraud, misrepresentation, or bad faith on the part of the person or persons having an interest in obtaining the waiver (5302(c); 38 C.F.R. §§ 1.963(a), 1.965(b)); and, 2) collection of such indebtedness would be against equity and good conscience. 38 U.S.C.A. § 5302(c); 38 C.F.R.
§ 1.963(a). Thus, a finding of fraud, misrepresentation, or bad faith precludes a grant of a waiver of recovery of the overpayment.
The controlling legal criteria provide that the standard of "equity and good conscience" will be applied when the facts and circumstances in a particular case indicate the need for reasonableness and moderation in the exercise of the Government's rights. 38 C.F.R. § 1.965(a). The decision reached should not be unduly favorable or adverse to either side. The phrase equity and good conscience means arriving at a fair decision between the obligor and the U.S. Government.
In making this determination, consideration will be given to the following elements, which are not intended to be all inclusive: (1) Fault of debtor. Where actions of the debtor contribute to the creation of the debt. (2) Balancing of faults. Weighing the fault of the debtor against the VA's fault. (3) Undue hardship. Whether collection would deprive the debtor or his or her family of basic necessities. (4) Defeat the purpose. Whether withholding of benefits or recovery would nullify the objective for which benefits were intended. (5) Unjust enrichment. Failure to make restitution would result in an unfair gain to the debtor. (6) Changing position to one's detriment. Reliance on VA benefits results in relinquishment of a valuable right or incurrence of a legal obligation. 38 U.S.C.A. § 5302(c); 38 C.F.R.
§ 1.965(a).
In this case, the Veteran and his representative contend in an April 2014 statement that a waiver, at least in part, should have been granted based on the RO's failure to consider or act on the Veteran's July 2010 request for dependency and apportionment for his mother and his July 2010 notice of incarceration.
After a review of all of the evidence, to include lay evidence, the Board finds that the overpayment of VA compensation benefits in the amount of $16,380 was validly created (see 38 U.S.C.A. §§ 1114(a), 5313; 38 C.F.R. § 3.665; the creation of the overpayment in the amount of $16,380 did not involve fraud, misrepresentation, or bad faith on the part of the Veteran (see 38 U.S.C.A.
§ 5302(c); 38 C.F.R. §§ 1.963(a), 1.965(b)); and, applying the equitable principles and resolving reasonable doubt in the Veteran's favor, the Board finds that a partial waiver of overpayment in the amount of $4,000, but no more, is warranted for the overpayment created during the period from May [redacted], 2010 to November 26, 2010 (see 38 U.S.C.A. § 5302; 38 C.F.R. §§ 1.963, 1.965).
In this case, the Veteran was convicted of a felony and was incarcerated on March [redacted], 2010. On July 21, 2010, the Veteran notified VA of the felony incarceration.
In a November 2010 decision, the RO reduced the Veteran's benefits to the 10 percent rate effective May [redacted], 2010 in accordance with 38 C.F.R. § 3.665, thus, validly creating an overpayment in the amount of $16,380.00 for the period from May [redacted], 2010 to November 30, 2010. 38 U.S.C.A. §§ 1114(a), 5313; 38 C.F.R. § 3.665.
While the Veteran and his representative submitted informal notice of the incarceration, received on July 21, 2010, along with records from Lane County Corrections listing the Veteran's dates of incarceration, it does not appear that the RO took any action to reduce the Veteran's benefits pursuant to the July 2010 notice. Instead, benefits were proposed to be reduced upon an independent September 2010 search of the Veteran's record and subsequent confirmation from the correctional institution.
The Board next finds that the overpayment was not the result of fraud, misrepresentation, or bad faith on the part of the Veteran. 38 U.S.C.A. § 5302(c); 38 C.F.R. §§ 1.963(a), 1.965(b). Based on the notice to VA of incarceration that was provided by the Veteran and his representative in July 2010, the Board finds that, while the Veteran did not submit notification of his March [redacted], 2010 incarceration in a timely manner, he was not fully aware that he was in receipt of an overpayment in VA benefits prior to the July 2010 date of notification. Accordingly, the Board finds no fraud, misrepresentation, or bad faith on the part of the Veteran in the creation of the overpayment.
As the evidence does not establish fraud, misrepresentation, or bad faith on the part of the Veteran, the Board will next determine if a waiver of recovery of the VA indebtedness is warranted on the basis of equity and good conscience under
38 U.S.C.A. § 5302(a); 38 C.F.R. §§ 1.963(a), 1.965(a). For the reasons discussed below, the Board finds that repayment of the Veteran's indebtedness in the amount of $4,000 would violate principles of equity and good conscience, and that a partial waiver of the overpayment of $4,000 created during the period of incarceration from May [redacted], 2010 to November 30, 2010 is warranted.
The Board finds that the Veteran was at fault in the creation of the indebtedness due to his incarceration, and his failure to report the incarceration prior to July 21, 2010. The record shows that the Veteran had been incarcerated in the past, prior to the period of incarceration at issue, and that he had a past reduction of benefits due to such incarceration. The Board finds, therefore, that a reasonable person in the Veteran's situation would have known that the failure to report his incarceration could result in the creation of an overpayment in benefits.
On July 21, 2010, the Veteran's representative provided VA with notice of the Veteran's March 2010 incarceration. While the Board finds that the Veteran was at fault in not providing VA with notice of incarceration prior to July 21, 2010, the Board finds that VA is also partially at fault in not acting to reduce the Veteran's benefits upon receipt of the July 2010 notice.
The first two elements for consideration under 38 C.F.R. § 1.965(a) are the fault of the debtor, and balancing the fault of the debtor and VA. The Board finds that, while there no fault on the part of VA in the reduction of the VA benefits from May [redacted], 2010 based on the Veteran's incarceration, there was some fault in VA's failure to act on the earlier July 2010 notice of incarceration provided by the Veteran. Assuming the Veteran was not aware of the overpayment of benefits, his action in accepting VA benefits during the time period from May 2010 to November 2010 still contributed to the creation of the overpayment. Moreover, the record shows that, pursuant to a prior May 2009 decision, the Veteran had a reduction of benefits in the past year due to a prior period of incarceration. Therefore, a reasonable person in the Veteran's position would have been aware that an incarceration would result in a significant reduction of benefits. In November 2010, the Veteran was informed of the reduction of his award and, in December 2010, he was informed of the amount of the overpayment debt. The Board finds that the Veteran's failure to return the amount of the overpayment lies solely with the Veteran and this represents the greater degree of fault in balancing the actions between the Veteran and VA.
The Board finds that repayment of the debt would not deprive the Veteran of the basic necessities of life. As to the element of undue financial hardship, the regulation provides that consideration should be given to whether collection of the indebtedness would deprive the debtor or his family of the basic necessities. The record shows that the Veteran is currently in receipt of a total disability rating based on individual employability and an October 2012 employment questionnaire shows that he is currently unemployed. The record shows that the Veteran is in receipt of current income, in the form of VA disability payments, in the amount of $2,973.00 a month as of December 2012 and $3,017.00 a month as of January 2014. The Board notes that, while the Veteran indicated that he contributed money toward the care for his mother, in a January 2011 statement, the Veteran's mother indicated that she was also receiving $1,054.00 a month in Social Security benefits. The Veteran's mother's Social Security income was confirmed in an August 2011 statement from the Veteran's wife.
In June 2011, the Veteran reported that he had no monthly expenses or income due to his incarceration, but indicated that he was paying all living expenses for his mother and wife, to include the cost of water, electric bills, food, and medical bills, prior to the reduction of his benefits. In a March 2011 statement, the Veteran identified monthly expenses, totaling $2,371.00 a month, as follows: $111.00 for phone bills, $220.00 for food, $100.00 for medications, $20.00 for garbage, $450.00 for gas, $120.00 for car expenses, $150.00 in court debt, $1000.00 for a caregiver, and $200.00 in miscellaneous expenses.
In August 2011, the Veteran's wife identified monthly household expenses, totaling $1505.00 a month, as follows: $200.00 for rent or house payments, $200.00 for food, $200.00 for utilities, $55.00 for telephone, $25.00 for clothing, $175.00 for medical expenses, $350.00 for car and gas expenses, $55.00 for household supplies, $145.00 for pet expenses, and $100.00 for an expense that was illegible on the expense report, but was identified under the category of other expenses. Based on the Veteran's current income from VA compensation in excess of $3000.000 a month, and previously identified monthly expenses ranging between $1371.00 to $1505.00 a month, which excludes costs of a caregiver for the Veteran's mother as she is now deceased and as part of the cost of her care would have previously been covered by her Social Security benefits, the Board finds that the collection of the overpayment debt at issue would not deprive the Veteran of the basic necessities of life. For these reasons, the Board finds that repayment of the overpayment debt would not result in hardship to the Veteran.
With regard to the other elements pertaining to the principles of equity and good conscience as set forth by 38 C.F.R. § 1.965(a), the Board finds that recovery of the overpayment, in the amount of $4,000.00, would defeat the purpose for which benefits were intended. The record shows that, in October 2010 and April 2011, the RO denied a dependency and apportionment claim for the Veteran's mother because they did not receive a copy of the Veteran's birth certificate. In the April 2011 letter, the RO informed the Veteran that they would continue to process the claim if the requested evidence was received by September 2011. The Veteran submitted a copy of his birth certificate within the allotted time frame in April 2011; however, the dependency and apportionment claim was never readjudicated by the RO. The Board finds that, had these claims been adjudicated, they would possibly have had an effect on the amount of the overpayment created during the relevant period of incarceration.
Assuming, in a light most favorable to the Veteran, that the his mother would have been awarded dependency and apportionment benefits from August 1, 2010, the first day of the month after the receipt of the July 2010 claim for apportionment, the award amount would likely be comparable to what his dependent spouse was later awarded in apportionment pursuant to an August 2011 decision. In August 2011, the Veteran's spouse was awarded a $1000.00 a month apportionment of benefits effective from May 1, 2011. Accordingly, had dependency been established for the Veteran's mother, she would likely have been in receipt of an apportionment of benefits in the amount of $1000.00 a month for at least a part of the time period in which the overpayment was created, from August 1, 2010 to November 30, 2010, and this apportionment would have reduced the Veteran's total overpayment amount by $4,000.00. Because the award of apportionment benefits for the period from August 1, 2010 to November 30, 2010 would have been made for the purpose of providing for the support of a dependent parent, through the Veteran's compensation, where the Veteran was not residing with the dependent, see
38 C.F.R. § 3.450(a)(1)(ii), the collection of the debt in the amount of $4,000.00 would defeat the purpose of the apportionment of benefits, had such benefits been granted.
Moreover, because the Veteran would have been entitled to the apportionment payments made for a dependent parent during the part of the period in which the overpayment was created, from August 1, 2010 to November 30, 2010, the Board finds that the Veteran was not unjustly enriched by the amount of any such apportionment had it been awarded. The failure of the Government to insist upon its right to repayment of the assessed overpayment would, therefore, not result in unjust enrichment of the Veteran. The Board finds that the evidence does not show that the Veteran relinquished a valuable right or incurred any legal obligations resulting from reliance on VA benefits.
The Board finds that, with respect to the remaining amount of the overpayment debt in the amount of $12,380, because the Veteran had not notified VA of his incarceration prior to July 21, 2010, because he was not entitled to full benefits during the relevant period of incarceration, because he had no significant living expenses during his period of incarceration, because hardship has not otherwise been established, and because the failure of VA to collect the remainder of the overpayment debt would result in unjust enrichment by the Veteran as he was not entitled to full benefits during a period in which he was incarceration, and that collection of such debt during the period of the Veteran's incarceration would not defeat the purpose for which benefits were intended, which is for the Veteran's support due to disability, the Board finds that the recovery of remainder of the overpayment amount created during the period from May [redacted], 2010 to November 30, 2010 would not be against the principles of equity and good conscience and a waiver is not warranted for the remainder of the overpayment debt in the amount of $12,380.00. See 38 C.F.R.
§§ 1.963, 1.965.
Given the fact that the overpayment debt was not a result of fraud, balancing other factors discussed above, to include fault of the Veteran, VA's fault, the purpose for which the unadjudicated apportionment of dependent benefits were intended, the fact of the Veteran's incarceration, the lack of unjust enrichment if the debt in the amount of $4,000 were to be waived, and the unjust enrichment of the Veteran if more than $4,000 were to be waived, the Board finds that recovery of the overpayment in the amount of $4,000 would be against the principles of equity and good conscience, and the amount of overpayment debt to $4,000 should be waived; however, for the reasons stated above, the Board also finds that the criteria for waiver of recovery of the remainder of the overpayment in the amount of $12,380 are not met. See 38 C.F.R. §§ 1.963, 1.965.
ORDER
A partial waiver of recovery of an overpayment of VA benefits in the amount of $4,000, but no higher, is granted.
____________________________________________
J. PARKER
Veterans Law Judge, Board of Veterans' Appeals
Department of Veterans Affairs